The Finnish?Line

On June 16, 2023, Finland’s new government announced the government program titled “A Strong and Committed Finland”. The plan was received with mixed reception and faced criticism on multiple fronts.

?One of the most controversial changes was the 180 turn on immigration and labour policies. Some of the changes included:

• 8 years of residence period for obtaining citizenship.
• 6 years of residence period for obtaining permanent residence.
• Cancellation of work-based residence permits after 3 months of unemployment.

Undoubtedly, these rules foster the creation of parallel societies in Finland where the immigrant population pays equal taxes but gets fewer rights for an extended amount of time. However, since the new Minister of the Interior Mari Rantanen claims to believe in numbers and statistics:

we will use exactly numbers and statistics to see what the potential economic impact of these new policies can be and if arguments made by the new parties have any factual grounds.

There are many aspects of the government plan worth discussing but this article will mostly focus on work-based immigration and its socio-economic effects. The article will illustrate that in the end, it is the Finnish citizens who will have to pay the hefty price for the anti-immigrant policies planned by the new government.

Finland’s Demographic Structure

Finland’s population is ageing. Over the past few decades, life expectancy has risen while the birth rate has decreased consistently. If the current low birth rates and increasing life expectancy continue at the same rate, the working-age population is projected to decrease by nearly 20% in the next 40 years. This trend can be clearly observed in Finland’s population pyramid presented below.

The shrinking bottom and the growing top of Finland’s population pyramid for the past 20 years have been gradually inverting it. The inverted population pyramids pose a significant threat to the national economy since they can seriously destabilise the financial equation holding the welfare state intact. With a smaller working-age population, tax income will decrease, while the costs of healthcare services will increase due to longer life expectancy. Moreover, any substantial increase in the birth rate would be slow to impact the workforce and would incur additional spending on education and upbringing of younger individuals to working age.

For the past 20 years, Finland has formed 11 cabinets with vastly different programs, however, there is no visible deceleration in the population structure decay. The graph above illustrates how the age dependency ratio has grown for the past 20 years with each governmental term. By the end of 2022, Finland’s age dependency ratio was 62.5%. The only two developed countries that have a higher age dependency ratio are Japan and Israel.

?The longer this upward trend is sustained, the harder it will become for any government to address the issue. The decreasing tax income will impact the ability of any government to enact successful policies that can effectively tackle the projected crisis. This will inevitably lead to more borrowing with a less working population capable to pay off the rising government’s dept.

Decreasing the unemployment rate as suggested by the new government might seem like a sensible intuitive solution at first, however, even achieving the unrealistic 0% per cent unemployment rate is not going to solve the problem from a demographic perspective. The age profile of the unemployed population is already included in Finland's demographic pyramid. Hence their employment status has little effect on the situation at hand. Sooner or later the working population will feel the rising burden of supporting the dependent population. In this case, the government's options are rather limited. The government can attempt to increase the birth rates, shorten expectancy or increase immigration. The first, if implemented effectively will have an effect in 20 years, and has to remain effective for at least 20 years to have a meaningful long-term impact. The second is criminally malicious towards the elderly population and can be achieved by limiting access to public healthcare (something that the current government already intends to do). Third, if done correctly can have a quick and potentially meaningful long-term effect on the economy.

Immigration

Some of the governmental parties and a sizable body of research are suggesting immigration as a possible solution for addressing the issue of the ageing population. However, for immigration to be effective, Finland needs to step up its game for competing over a limited pool of immigrant workers. The new changes introduced in the government plan make other European states more attractive to an average immigrant that has a delicate equation to balance between salary & tax levels, cost of living, and citizenship timeline. While salaries in Finland are relatively high the cost of living has been rising steadily which has a detrimental effect on Finland's competitive edge. Increased permanent residency and citizenship timelines diminish the advantages altogether.

Between 2015 and 2022, the level of work-based immigration has been rising yet it remained rather limited. As depicted in the graph below only 68.500 new work-based residence permits were issued in a period of 8 years (approx. 8500 per year on average).

Out of these 68.500, only 10.000 applied for a specialist visa (approx. 1250 per year on average)

It is also visible that work-based immigration is second in the total number of applications. Family-based residence permits that largely are granted to families of work-based immigrants are the largest portion of immigrants. Looking at the same group of people from the perspective of the age composition illustrates that indeed all people belong to the groups that Finland is in dire need of. Young families arriving in Finland not only help with short-term labour issues but also give a long-term boost to birth rates.

Additionally, the cultural background of the vast majority of immigrants is predominantly European. Nearly half of all immigrants are either from Russia or Ukraine. This eliminates the large cultural gaps and decreases potential cultural integration time. Hence, the xenophobic sentiments often used to fearmonger by the new government are not supported by the very same government's migration office.

Looking at the official statistics from Migri in juxtaposition with the population pyramid it became clear that the amount of new “imported” workforce is critically low if Finland intends to support the ageing population. The immigration patterns observed above illustrate that so far past governments have adopted a sort of homoeopathic policies towards immigration that proposed watered-down policies that mostly failed to position Finland as a working hub in the international labour market. However, during the past years, the problem has become too serious to experiment with home remedies. It has become clear that the decay of demographic structure is not an issue that can be solved by internal means and external “medicine” is necessary to prevent the looming crisis.

Immigration strengthens the solvency of the social security system by immediately boosting the number of new workers. From a purely financial point of view, immigrants are a ready workforce that Finnland's taxpayers did not pay for 20 years to raise, educate and care for. Additionally, workers that bring their families and kids provide additional support to the decaying demographic pyramid with close to zero upfront investment from the state. While it is true that spouses of newly immigrated workers might become recipients of social benefits, the social benefits paid to these population groups for several years are far less than what Finland would have to pay to raise the same number of people to working age in Finland. Furthermore, the social benefits paid out to people who reside in Finland are not a net negative from an economic perspective. Social benefits are economic stimulus checks distributed to the weakest groups of the population. Immigrant social security support is the money that they spend inside the country and it's the same money that becomes local's income(income that is also taxed by the government).

Immigration has all the right components for addressing the looming demographic crisis. However, the components alone are not enough to fashion a functioning machine. These components should be systematically put together into a larger framework by the Government through increasing immigration volumes, speeding up integration timelines and motivating international workers to arrive and stay in Finland.

"Yes, but..."

Nevertheless, the proponents of anti-immigration policies materialized in the form of the new government often take a stance that the potential downsides of immigration are far worse than increasing the burden on the working population. The most commonly voiced arguments include:

• Claims that increased immigration will raise crime rates.
• Threats that immigrants will take the jobs of the locals.

Luckily, in Finland, there is open data available for validating/refuting these claims.

"Immigrants Increase Crime Rates"

The claim that increasing immigration volume leads to an increase in crime rates is one of the most commonly heard statements among those who are opposed to pro-immigration policies. Luckily this hypothesis can be easily tested.

First, let's have a look at the total number of crimes committed in Finland between 2015 and 2022 juxtaposed with the total number of new residence permits granted.

If letting more immigrants into the country increases the crime rates, then these two time series should be correlated(when one goes up the other should follow). Already visually we can observe that there is very little correlation between the two. Nevertheless, we need to take into account that there can be lagged correlations between them. Meaning that perhaps the effects of letting immigrants in are not affecting the crime rates immediately but rather after some time. To test this assumption we can perform a simple cross-correlation between the two time series. This involves moving one time series along the other and checking for correlations at every step. The results can be seen below.

As shown in the chart above there are extremely weak negative and positive correlations that are not statistically significant (If there were statistically significant the main blue line would cross one of the red lines. Crossing the top red line would indicate a positive correlation while crossing the bottom red line would indicate a negative correlation). Hence, we can refute the statement that increasing immigration leads to increased crime rates since this has not been the case in the past 8 years for Finland.*

Nevertheless, to ensure that immigrants are not blamed for the crime rates we can further break down the number of committed crimes based on the nationality of the suspect who committed the offence. The graph below illustrates the percentage of crimes committed in Finland by nationality between 2000 and 2022.

As we can see, as of 2022, about 88.3% of all crimes are committed by Finnish nationals, about 7.2% are committed by other European nationals and only about 4.3% of all crimes are committed by Non-EU nationals. If we translate these values to their representative populations then crime rates amongst Finnish citizens would sit at around 5.69% while the crime rates among Non-EU nationals would sit at 3.02%. Hence, Finnish nationals are 1.88 times more likely to commit a crime than Non-EU Nationals. This does not come as a surprise to any immigrant, since all immigrants are well aware that they might lose their residence permits in case of any criminal involvement. Already at the application stage, all residence permits ask the applicant to disclose all criminal offences therefore even those who never committed a crime know that this information is part of the consideration when granting a residence permit. This awareness can be one of the reasons why Non-EU nationals are more careful with the law than Finnish nationals who will not face deportation regardless of the severity of the committed crimes.

To conclude, the number of granted residence permits is not correlated with crime rates and crime rates among Non-EU citizens are almost twice lower than crime rates among locals.

"Immigrants Will Take Our Jobs"

This argument commonly stems from oversimplification of the economic relationships. The number of jobs in the Finlands economy is not fixed. A hired worker increases the productivity of the company which leads to growth allowing for more workplaces to appear. It is true that in some segments, migrants may compete with existing workers in Finland, however, this competition will not take place across all skill levels and industries. It will make everyone involved in the labour market more productive by encouraging professional skill-building. In the end, this competition will lead to increased productivity of the overall market which is again a net positive for everyone living in Finland. Additionally, if a company can hire qualified employees faster the given employee can start contributing faster leading again to longer periods of increased productivity.

If hiring is only limited to local professionals then in cases when necessary specialists are not found locally the company will need to train and invest in advance before reaching a productivity increase. These sorts of delays are detrimental to the growth of the economy at best and can be fatal for certain companies at worst.

Additionally, according to statistics Finlands data entrepreneurship levels among immigrants are higher than among Finns. The entrepreneurship levels among migrants have been gradually rising since the year 2000.

This can potentially mean that an immigrant is slightly more likely to start a business and create new workplaces than a local. These figures are even more outstanding when you consider that it is much harder for a foreigner to find a job or to start a business in Finland because of the language barrier and lack of connections that play a big role in the local market.

Let us also not forget that many of the traditional brands that Finland is proud of today were established by immigrants, including Arabia, Finlayson, Sinebrychoff, and Paulig.

To conclude, the number of jobs in the economy is not fixed, Immigrants have a higher rate of entrepreneurship and potentially a higher likelihood of creating new workplaces.

Final Thoughts

No immigrants have moved to Finland because they enjoy the long dark winters, lovely Novembers or cherish being bitten by a giant mosquito. They immigrated despite all the difficulties motivated by the idea of Finland as an open country. If this idea and the common vision that attracted people cease to exist many other countries will instantly become more attractive. If the Finland that people chose to migrate to no longer exists, immigrants that are not welcome will look for a new home(again).

The immigration course outlined in the new government plan is not Finland that people fell in love with. It is discriminatory. It fosters the creation of parallel societies where immigrants are considered second-class citizens that pay equal taxes yet receive fewer rights. Immigrants will be less protected by social security and the legal system. A foreigner that lived in Finland for 8 years can now lose their job for 3 months and be deported. This policy will eliminate all reasons for foreigners to contribute to social security and unemployment funds because they are no longer protected by them.

What makes the situation even worse for immigrants is that they had no say in any of these choices. (Immigrants in Finland don't have full voting rights.) The past months for many immigrants passed in shock and disbelief while they quietly watched how the Finnish neighbours, friends and colleagues they lived with for many years decided their future for them. This situation will inevitably prompt many immigrants to take control of their future by either protesting the changes or leaving Finland.

The scenario of working migrants leaving the country is perhaps the worst case for Finnish citizens. Only from a financial point of view, a working immigrant that leaves Finland is a monthly rent unpaid, a salary not spent, savings not invested, a product not bought and a salary not received by the locals. Additionally, if a worker leaves Finland they instantly become a liability for Finland since the Finnish state will still be liable to pay a portion of their pensions regardless of their new country of residence. This money will leave Finland and be spent elsewhere making Finland pay for boosting another country's economy.

It is in Finnish citizens' utmost interest that immigration volumes increase and the immigrants that are already in Finland remain in Finland. The economy is a complex adaptive system and as with any other complex system, it is impossible to remove parts of this system and guarantee that it will not result in cascading failures.

I have no doubt that these policies will end up being suicidal for the new government. The discrimination against immigrants has made immigrants ever more united and ever more involved in politics. Educated migrants will protest, support opposition parties financially and make their voices heard. It is only a matter of time before the populism that disregards statistics and taps into xenophobic sentiments exhausts itself.

At the end of the day, the Finnish citizens are the ones who would have to live in Finland of tomorrow which is being shaped today. It is the Finnish citizens that would bear the responsibility for the reckless policies proposed. Hence, I strongly encourage my network to stay vocal on the subject not for the sake of immigrants but for your own. Any immigrant will tell you that it's always better to try to fix things before it's too late instead of slowly losing your home and suddenly having no other choice but to migrate.

Data & Code :

All data extracted from the StatFin database and the code used for the analysis are included in the repository for reproducibility.

Feel free to contribute, suggest edits and extend the analysis.

Notes:

The views presented in this article belong solely to the author and do not necessarily reflect the opinions of any affiliated individuals or organizations. Readers are encouraged to conduct their own context-specific research before making any decisions based on the content of this article.

*Note that this study does not include refugees that were arriving in Finland during the 2014 war in Ukraine, the 2015 refugee crisis and the 2022 war in Ukraine. If we also include the refugees then the argument against immigrants increasing the crime rates will be even stronger.

References:

• United Nations, Department of Economic and Social Affairs, Population Division. World Population Prospects: The 2022 Revision.
• Migri Statistics
• Population pyramid data
• Demographic Change and Social Security: Some Elements of a Complex Relationship
• Immigration’s Effect on the Social Security System
• The Labour Market Effects of Immigration
• Recruiting Immigrant Workers: Europe
• Study: Immigration needs tripling to maintain Finland's labour force
• Immigration and the Adequacy of Labor Force – Evaluation of the Economic Effects
• 5 iconic Finnish companies founded by immigrants
• StatFin: Persons suspected of solved offences by nationality
• StatFin: Persons suspected of solved offences living permanently in Finland
• StatFin: Population by area, the main type of activity...
• Finland's Balancing Act: The Labor Market, Humanitarian Relief, and Immigrant Integration